"PARIS—-The French Socialist government on Friday unveiled the country's
toughest budget in decades, hiking taxes for the rich and big business in a bid
to slash its deficit while facing a stalled economy.

President François Hollande, in his first budget since being elected five
months ago, has pledged to balance public accounts by the end of his mandate in
2017 and given himself two years to turn around the French economy.

According to documents presented at the weekly cabinet meeting Friday, the
government aims to lift revenue from household income taxes by 23% next year,
while revenue from business taxation is expected to rise almost 30%.

"We're asking the wealthiest taxpayers to make an effort," Prime Minister
Jean-Marc Ayrault said after the weekly cabinet meeting. "As for companies,
we're bringing back justice. CAC-40 firms pay less taxes than small
companies…now we're asking them to contribute."

The budget increased the top marginal income-tax rate to 45% from 41%, and
detailed plans for a special tax on incomes above €1 million ($1.29 million) a
year, with 1,500 individuals paying an overall rate of 75%. They will pay on
average €140,000 more in taxes next year, the government said.

The biggest new tax-take from business will come from limiting the deduction
of financial charges from a company's taxable income. Now, businesses can deduct
financial charges from their declared taxable income, a measure the government
said benefits large companies and encourages debt financing over capital.
Limiting the possible deduction to 85% of a company's financial charges will
increase tax intake by €4 billion in 2013, the finance ministry said.

The budget comes at a difficult time for the euro zone's second-largest
economy after growth ground to a halt in the final quarter of last year and
failed to expand for the following nine months. Flagging growth has pushed
unemployment above 10% this year. . . .

A spate of plant closures that started last summer . . . cutting hundreds of jobs, has seen the
government's approval rate plunge. Mr. Hollande is counting on economic growth
to pick up from next year, reaching 0.8% in 2013 and 2% a year after. . . .

"This all-tax budget doesn't bring a solution to our two main challenges: how
to cut public expenditure and how to improve the competitiveness of our
companies," Gilles Carrez, the conservative head of the National Assembly, said
in a statement. . . .

Fresh figures published Friday showed the country's debt pile kept climbing,
reaching 91% of gross domestic product in the second quarter of the year, up
from 86.2% a year earlier. . . .